There have been a bunch of changes to IRA rules in 2020 due to fallout from Covid. As I talked about in a previous post, IRA owners can withdraw up to $100,000 and owe no taxes on that distribution for 3 years. Also, if it is put back into an IRA within those 3 years, no taxes will be owed.
There is also a provision in the new law that waives the required minimum distribution (RMD) from your IRA in 2020. Normally, any IRA owner over the age of 72 or owner of an inherited IRA is required to take an RMD every year. Because 2020 is anything but normal, this requirement is waived.
So, if you haven’t taken your RMD yet and you don’t need it, you might consider keeping it in your IRA to reduce your taxable income for 2020. Also, if you have already taken it, you can spread that distribution over the next 3 years to reduce your taxable income for this year. Keep in mind, doing this may increase your taxable income over the following 2 years so consult your tax advisor in order to make the most informed decision.
Please let me know if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
